Big Tech Is Downsizing Workspace in Another Blow to Office Real Estate
Pullback marks a sharp reversal after years when companies had been bolstering their office footprints
3 min
Big technology companies are cutting back on office space across major coastal cities, leaving some exposed landlords with empty buildings and steep losses.
The pullback marks a sharp reversal after years when companies such as Amazon.com , Meta Platforms ’ Facebook and Google parent Alphabet had been bolstering their office footprints by adding millions of square feet of space.
Their expansion continued even after the pandemic erupted and many employees started working remotely. Tech companies have been the dominant tenant in West Coast cities like Seattle and San Francisco, and by 2021 these companies came to rival those in the finance industry as Manhattan’s biggest user of office space .
Now, big tech companies are letting leases expire or looking to unload some offices. Amazon is ditching or not renewing some office leases and last year paused construction on its second headquarters in northern Virginia. Google has listed office space in Silicon Valley for sublease, according to data company CoStar . Meta has also dumped some office space and is leasing less than it did early on in the pandemic.
Salesforce , the cloud-based software company, said in a recent securities filing that it leased or owned about 900,000 square feet of San Francisco office space as of January. That is barely half the 1.6 million of office space it reported having in that city a year earlier.
Tech giants looking to unload part of their workplace face a lot of competition. Office space listed for sublease in 30 cities with a lot of technology tenants has risen to the highest levels in at least a decade, according to brokerage CBRE . The 168.4 million square feet of office space for sublease in the first quarter was down slightly from the fourth-quarter 2023 peak but up almost threefold from early 2019.
Even tech companies that are renewing or adding space want less than they did before. The amount of new office space tech companies leased fell by almost half in the fourth quarter of last year compared with 2019, CBRE said.
Tech’s voracious appetite for office and other commercial real estate had been an economic boon for cities. The new workspace usually brought an influx of well-paid employees, boosted cities’ property-tax revenue and translated into more business for local retailers and shop owners.
Now, the waning appetite is a blow to cities at a time when it is difficult to find other big tenants. For landlords already grappling with higher interest rates and a drop in demand from financial companies, law firms and other tenants, tech’s reversal is especially painful.
In some cases, tech’s softening demand can lead to plunging real-estate values. Take 1800 Ninth Avenue, a 15-story office building in Seattle. Amazon’s rent payments helped almost triple the building’s value in the decade after the 2008-09 financial crisis.
In 2013, Amazon moved into about two-thirds of the building. At the end of that year, the building sold for $150 million—almost double the $77 million it had sold for just two years earlier.
Its price kept climbing as strong demand from tech companies and low interest rates drew big investment firms into the Seattle commercial-real-estate market. In 2019, J.P. Morgan Asset Management bought the building for $206 million.
Amazon’s lease expires this year, and the company is moving out. The building is listed for sale. It is expected to sell for about a quarter of its 2019 price, according to estimates by real-estate people familiar with the property.
“We’re constantly evaluating our real-estate portfolio based on the dynamic and diverse needs of Amazon’s businesses by looking at trends in how employees are using our offices,” an Amazon spokeswoman said in a statement.
When the pandemic upended the U.S. office market, large tech companies were initially a bright spot. They continued adding space, betting they would eventually need it as they hired more people and as employees gradually returned to the office.
“Big tech was pretty resilient,” said Brooks Hauf , a senior director at brokerage Avison Young.
That changed in 2022. Remote work continued to be popular, and some big tech companies laid off workers , meaning they needed less space than they had thought, said Colin Yasukochi , an executive director at CBRE’s Tech Insights Center.
Leasing by tech companies fell by about half between the third quarter of 2021 and the third quarter of 2022, according to CBRE.
Since then, companies tied to the booming artificial-intelligence business have leased more space in San Francisco and other cities. But that hasn’t been enough to meaningfully boost the office market. San Francisco’s office-vacancy rate hit a record 36.7% in the first quarter, according to CBRE, up from just 3.6% in early 2019.
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As interest rates, inflation and market sentiment fluctuate, investors are being urged to focus on data, not panic.
Australia’s housing affordability crisis is being fuelled by chronic undersupply, planning delays and rising development costs, as politicians continue to focus on the wrong solutions.
3 min
Australia’s housing crisis will not be solved by first-home buyer incentives or tax changes alone, with leading property figures warning governments must tackle supply constraints if affordability is to improve.
Speaking at the Kanebridge Quarterly Property Leadership Summit in Sydney last week, expert project marketing specialist Sam Elbanna, property investor and fund manager Paul Miron and property consultant Karla McNeice said that a lack of housing supply remained the central issue facing the market.
Elbanna, Director of CPM Realty with more than 30 years’ experience in project sales, argued that successive governments had focused too heavily on stimulating demand rather than addressing the barriers preventing new housing from being delivered.
“The misconception is that politicians think the way to solve the housing crisis is to drive demand,” he said.
“The reality is that’s not the way. This is a supply-side problem, and it needs to be solved on the supply side.”
Drawing on his experience in project sales, Elbanna said policies designed to help first-home buyers often had unintended consequences, pointing to previous grants that ultimately flowed through to higher property prices.
Instead, he said developers were facing increasing red tape, approval delays and rising costs, which were discouraging new housing supply.
“In the absence of stock, demand exceeds supply,” he said.
Miron, a Co-Founder and Fund Manager of Msquared Capital, said the housing debate had become overly focused on tax policy while overlooking broader structural issues.
He argued that affordability challenges stemmed from a combination of factors, including planning constraints, supply shortages, migration levels and interest rates.
“No-one can be 100 per cent certain on the real reason for property prices is going up,” he said.
“The reason why property prices are higher is a combination of interest rates, lack of supply, migration, vacancy rates and maybe taxes play a role.”
Miron was critical of recent federal housing policy changes, warning they could reduce the number of new homes being built and further constrain supply that was even highlighted in the budget.
He also highlighted the importance of the property sector to the broader economy, noting that residential real estate and related industries employed more than one million Australians.
McNeice, who advises developers on sales strategy and market intelligence, said understanding buyers had become increasingly important as affordability pressures intensified.
While affordability remained a major consideration, she said today’s buyers were focused on value rather than simply price.
“People are looking for value for money,” she said.
She said buyers were increasingly evaluating factors such as transport connections, walkability, nearby amenities and flexible living spaces that could accommodate changing family needs.
“What infrastructure is going on? Can I walk to the shops? Can I meet people at the local cafe?” she said.
The panel also discussed the mounting pressures facing developers, with Elbanna arguing that many projects become financially unviable from the moment a site is purchased.
“The viability of a development happens at the moment the site is bought,” he said.
He said rising construction costs, higher interest rates and overly optimistic feasibility assumptions had left some developers exposed as market conditions changed.
While acknowledging the growing number of smaller and first-time developers entering the market, Elbanna said property development required expertise across finance, construction, marketing and legal disciplines.
“It is actually a business that requires a level of expertise,” he said.
Looking ahead, the panel agreed opportunities remained in the market despite current challenges.
Miron said property should continue to be viewed as a long-term investment and cautioned against trying to time short-term market movements.
McNeice said success would increasingly depend on identifying projects that genuinely met changing buyer expectations.
Elbanna said affordable housing remained achievable, but developers needed to deliver more than just homes.
“We can provide affordable housing in this country,” he said.
“But we’ve got to wrap that affordable housing with the things that people want.”
As Australia’s housing affordability debate intensifies, the panellists agreed on one point: without a meaningful increase in housing supply, demand-side measures alone are unlikely to solve the nation’s property challenges.
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